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The effect of public sector employment on local labour markets

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  • Faggio, Giulia
  • Overman, Henry G.

Abstract

This paper considers the impact of public sector employment on local labour markets. Using English data at the Local Authority level for 2003–2007 we find that public sector employment has no identifiable effect on total private sector employment. However, public sector employment does affect the sectoral composition of the private sector. Specifically, each additional public sector job creates 0.5 jobs in the non-tradable sector (construction and services) while crowding out 0.4 jobs in the tradable sector (manufacturing). When using data for a longer time period (1999–2007) we find no multiplier effect for non-tradables, stronger crowding out for tradables and, consistent with this, crowding out for total private sector employment.

Suggested Citation

  • Faggio, Giulia & Overman, Henry G., 2013. "The effect of public sector employment on local labour markets," LSE Research Online Documents on Economics 50482, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:50482
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    File URL: http://eprints.lse.ac.uk/50482/
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    2. Davide Consoli & Mabel Sánchez-Barrioluengo, 2016. "Polarization and the growth of low-skill employment in Spanish Local Labor Markets," Papers in Evolutionary Economic Geography (PEEG) 1628, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Nov 2016.
    3. ., 2014. "Urban policies," Chapters, in: Urban Economics and Urban Policy, chapter 8, pages 185-218, Edward Elgar Publishing.

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    More about this item

    Keywords

    local labour markets; public and private sector employment; wages;
    All these keywords.

    JEL classification:

    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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